Portugal GDP Q2 2016

Portugal: Economic growth ticks up in Q2 according to revised data

August 31, 2016

Portugal’s GDP increased a seasonally adjusted 0.3% in Q2 over the previous quarter, according to revised data published by the National Statistics Institute on 31 August. This was a notch up from the flash estimate of 0.2% growth and matched the rate economists had been forecasting, but lagged far behind the rates promised by the government. On a year-on-year comparison, GDP expanded a revised 0.9% in Q2 (previously reported: +0.8% year-on-year), matching the growth rate in Q1.

Looking in more detail at the individual domestic components, overall domestic demand recorded a noticeable slowdown, despite the measures put in place by the government to reverse the austerity imposed by the previous administration. Private consumption growth decelerated from Q1’s 1.0% to a weak 0.1%, while government consumption growth remained at the previous 0.3%. On a positive note, total investment recorded a 0.7% increase over the previous quarter, which represented the highest level in four quarters and a solid rebound from Q1’s 0.6% contraction. Gross fixed investment dropped 0.1% compared to the previous quarter, though this still represents an improvement over the 0.7% fall marked in the first quarter.

The external sector was the main driver of the pickup in the Portuguese economy in Q2. It made an overall contribution to growth of plus 0.1 percentage points, the highest since September 2015, which contrasted the minus 0.4 percentage points recorded in Q1. Exports of goods and services accelerated to 1.3% growth, which exceeded the meagre 0.1% rise observed in the first quarter of 2016. Imports also rose from 1.0% in Q1 to 1.1% in Q2, however it was the boost on the export side that bolstered the economy.

The Bank of Portugal expects the economy to expand 1.3% this year, which is less optimistic than the government’s forecast of 1.8% stipulated in the 2016 budget. For 2017, the Bank foresees the economy growing 1.6%. FocusEconomics Consensus Forecast panelists expect GDP to expand 1.1% in 2016, which is unchanged from last month’s projection. For 2017, the panel foresees the economy growing 1.2%.

Author:Andrea Vetrugno, Economist

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Detailed figures released by the National Statistics Institute (INE) on 30 November confirmed that growth hit 0.5% quarter-on-quarter in Q3 (Q2: +0.3% quarter-on-quarter), amid a wave of strong growth results emerging out of the Eurozone.